China Southern Airlines, which reported a CNY330 million profit in 2009, stated the following about its prospects and priorities for 2010 (Reuters/AFP/Bloomberg/The Standard, 14-Apr-2010):

Traffic: The carrier expects to report double-digit growth in passenger and cargo volumes in 2010;

Chinese Yuan: The carrier stated it would benefit from a rising Chinese Yuan, as it has significant US dollar dominated debt, which account for 89.5% of total debt. CEO, Xu Jiebo, added that if the yuan appreciated by 1%, it could record CNY500 million of exchange gains;

Market share: Chairman, Si Xianmin, stated that the Guangzhou-based airline plans to boost its market share in Shenzhen from 30% currently to 40% within three years and Hainan market share from 32% to 40% by 2015. He added the carrier does not feel threatened by Air China's plan to take control of Shenzhen Airlines;

Freight: The carrier stated it is seeking to cooperate with international and domestic airlines to develop its air cargo business, with Mr Si commenting, "China Southern does not rule out the possibility to cooperate with some domestic airlines on developing cargo business". The carrier, which had planned to launch a cargo JV with Air France-KLM prior to the global economic crisis, commented that "Air France is not our only choice";

Capital spending plans: Plans to invest CNY16.4 billion in capex in 2010, unchanged from 2009's level, mainly for aircraft purchases. The airline expects to add 34 aircraft, taking the total to 412, by the end of 2010;

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China Southern plans to increase flights from five daily to 11 daily, about the size that ANA is today – and larger than Air China and China Eastern. Although China Southern can build on the principle of using Guangzhou as a North-South hub, North America is a radically different proposition. Guangzhou's southern positioning limits exposure to the Chinese market that China Southern knows best. China Southern will need to target connections to Southeast Asia and India, which have only been a small component of Air China and China Eastern's network.

There are two essential elements to the airline industry: flying aeroplanes and selling (and buying) seats. More technically this can be described as (1) operational; and (2) marketing and sales. There are other important activities, such as lobbying government to limit competition, and exploiting frequent flyer programmes, but those two are the core activities now facing disruption.

The former is unique to airlines, is uniquely regulated and engages massive governmental regulatory intervention, technical and economic. The marketing and sales activity has some aspects particular to aviation, but generally differs little from any other form of retail – except that most older airlines have tended to be particularly slow at learning the art.

This analysis reviews the nature and degree of disruption in each core area and what potential the future holds. In the regulatory area, China will be the big disruptor as it expands into its new global role; and technology and the associated rise in consumer empowerment will transform the process of buying and selling tickets. It will happen sooner than we expect.